Eviction suit complicates Eataly's River North restaurant plans

The owner of the Shops at North Bridge is suing to evict the Texas de Brazil steakhouse to make room for Eataly, which plans a sprawling food emporium in the River North space.

But Texas de Brazil is fighting back, insisting it has the right to stay in the downtown mall for at least five more years.

A venture of Santa Monica, Calif.-based Macerich Co., which owns the 680,000-square-foot North Bridge, sued an affiliate of Dallas-based Texas de Brazil Corp. earlier this month in Cook County Circuit Court, alleging the steakhouse won't leave a nearly 24,000-square-foot space at 51 E. Ohio St. even though Macerich terminated the lease in October. Macerich accuses Texas de Brazil of trying to scotch the Eataly deal.

Texas de Brazil alleges in court filings that Macerich failed to provide adequate notice that it wanted the steakhouse out under the termination clause.

The steakhouse chain has spent $3 million on construction costs for the restaurant and is allowed to stay in its two-story location through at least 2018, when the initial 10-year term of its lease ends, according to Texas de Brazil filings.

The battle casts a shadow over Eataly's plan to spend some $20 million building out a two-story, 63,000-square-foot food hall with multiple restaurants on the Ohio Street side of North Bridge. Eatley has agreed to lease the former ESPN Zone restaurant, just west of Texas de Brazil at 43 E. Ohio St., which covers 35,000 square feet. But Eataly also wants the steakhouse space.

Eataly, operated by New York-based Eataly USA LLC, a group that includes celebrity chefs Mario Batali and Joseph Bastianich, still expects to open the restaurants in 2013, a spokeswoman said in an email. She declined to comment on the lawsuit.

Messages left for a Macerich spokeswoman were not returned. A spokeswoman with Chicago-based Katten Muchin Rosenman LLP, which represents Macerich in the case, declined to comment.

DISPUTE OVER NOTICE

The mall owner gained a temporary termination clause allowing it to terminate the Texas de Brazil lease at any point during a 10-month period ending last December in exchange for reducing the chain’s rent in 2012 by $489,530.60, according to the Macerich lawsuit.

It told Texas de Brazil on Oct. 18 that the steakhouse had to leave by Jan. 31, providing more than the minimum 90-day notice period the termination clause required, the complaint says.

But the chain, which seeks to dismiss the suit, says Macerich had to give enough notice so that it could vacate the property within the 10-month period. Because Macerich had to give 90 days notice, the latest it could tell the steakhouse to move out was Oct. 2, said Daniel Mathless, a Chicago-based lawyer representing Texas.

“The termination has to be during the rent-reduction period,” he said. A Texas de Brazil executive declined to comment.

Both sides have a good case because the termination clause language is ambiguous, said Michael Delrahim, managing partner at Chicago-based Brown Udell Pomerantz & Delrahim Ltd. who isn’t involved in the case. That could push Macerich to seek a lease buyout rather than get caught in a long legal proceeding, he said.

“I certainly think it’s a motivation to reach an accord before the court rules on the issue,” Mr. Delrahim said.

Macerich also says Texas de Brazil fell behind on rent payments not long after opening in 2008. The steakhouse chain agreed to pay $54,778 a month initially. By May 2009, it was in arrears by $197,000, according to a lease amendment filed with the eviction suit.

Macerich gave a $98,000 credit for back rent and agreed to cut the restaurant’s rent payments to $28,400 a month for a six-month period that year. Macerich also gave the restaurant a break on rent in 2010 and 2011.

Texas de Brazil said in a court filing that such details were irrelevant to the current case, saying that “trumpeting of its previous rent abatement generosity does not affect” the language of the termination clause.

Both sides are due back in court Wednesday, according to Mr. Mathless, Texas de Brazil's lawyer.